3 Risks Las Vegas Sands' Investors Should Know About

Macau gaming stocks have struggled over the past year as a crackdown on corruption in Mainland China kept high rollers from visiting the region. Then, fall protests in Hong Kong, which feeds Macau many of its visitors, brought the city to a halt. As a result, gaming revenue plunged and so did gaming stocks.

Las Vegas Sands' stock has fallen 25% over the past year, and there are still reasons to be cautious going forward. Read on to learn about the three emerging risks that could drive the stock lower.

Macau's struggles continue and competition heats up Las Vegas Sands needs Macau to grow gaming revenue and earnings long-term, but the past three months have been relatively flat.In the fourth quarter of 2014, Macau's gaming revenue was down 24.5%. January didn't see much improvement, down 17.4% year over year, and moreproblems are on the horizon.

Competitors are building resorts in the Cotai region of Macau, and if there's not enough growth to fill each casino with new revenue, it could cannibalize revenue from Las Vegas Sands' existing resorts. Right now, there are five major resorts on Cotai -- City of Dreams from Melco Crown , Galaxy Macau by Galaxy Entertainment Group, and The Venetian Macau, Four Seasons Macau, and Sands Cotai Central from Las Vegas Sands.

Las Vegas Sands also is building The Parisian to expand on Cotai, but Wynn Resorts , MGM Resorts, Melco Crown, SJM, and Galaxy are all building either new megaresorts or major expansions on Cotai. As a result, Las Vegas Sands will own only four of eleven megaresorts when the building is complete in 2017 or 2018 -- afar cry from the dominant position it has today.

If -- and this is a big IF -- Macau's revenue grows to accommodate the new capacity, this won't be a problem. But right now that doesn't appear likely. Even a new resort may not keep Las Vegas Sands' Macau revenue growing over the next five years.

Singapore's luck fadesThe problems are not isolated just to Macau, either. Marina Bay Sands in Singapore is Las Vegas Sands' crown jewel and its most profitable resort, but its luck has swung wildly since it opened. Management expects win percentage among high rollers to be 2.7% to 3%, but in Q4 2013 it was 1.92% and in Q4 2014 it was 3.58%. Those swings are strange for a casino the size of Marina Bay Sands and affect profits every quarter.

The gaming trends at Marina Bay Sands carry another long-term concern. You can see below that rolling chip volume (VIP play) and non-rolling chip volume (mass-market play) are both down significantly over the past two years.

Source: Las Vegas Sands earnings releases.

Luck will play a role in earnings at a casino quarter-to-quarter, but long-term luck will balance out and volume will drive earnings trends. So, a decline in both VIP and mass-market volume is bad for Las Vegas Sands.

If Marina Bay Sands doesn't maintain its lucky streak or find a way to grow gaming revenue, we could see its profits fall in 2015 and beyond. As Las Vegas Sands' most profitable property, that would be bad news for investors, especially if they lose business to emerging gaming countries.

Competition from competing countries Macau and Singapore have enjoyed a quasi duopoly over gaming in Asia for the past five years, but that's about to change. The Philippines is expanding gaming, including a new resort from Macau based Melco Crown. Japan, South Korea, and Vietnam are also looking to expand gambling.

Some of these countries, like Japan, could potentially be growth market for Las Vegas Sands, but there's a distinct possibility that these will cannibalize some revenue from Singapore and Macau. Even if the company won one of the bids there, they could see profits at existing resorts decline.

Over-expansion in gaming has led to a decline in overall profits within the U.S. gaming market, and if Asia expands too quickly the same could happen there. For Las Vegas Sands, this is probably the #1 threat to its incredibly high profitability long-term.

Keep these risks in mind when looking at Las Vegas Sands stock, because how the industry evolves over the next few years will drive whether the stock goes higher or lower.